P7-20 (similar to)

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You are considering making a movie. The movie is expected to cost

$10.2

million upfront and take a year to make. After that, it is expected to make

$4.3

million in the first year it is released (end of year 2) and

$1.9

million for the following four years (end of years 3 through 6) . What is the payback period of this investment? If you require a payback period of two years, will you make the movie? What is the NPV of the movie if the cost of capital is

10.5%?

According to the NPV rule, should you make this movie?

What is the payback period of this investment?

The payback period is

nothing

years.(Round up to nearest integer.)